UPDATE: Prosecution for Attempted TARP Fraud
March 2010
George J. Terwilliger III,
Darryl S. Lew,
Daniel Levin,
G. William Currier,
Fernando L. Aenlle-Rocha
DOWNLOAD PDF: UPDATE: Prosecution for Attempted TARP Fraud
The focus of investigators and prosecutors in exposing fraudulent criminal activity related to federal government bailout efforts has resulted in the first criminal charge for attempting to defraud the Troubled Asset Relief Program ("TARP").
On March 15, 2010, Charles J. Antonucci, Sr., former President and Chief Executive Officer of a bank in New York City, was arrested and charged with, among other unlawful conduct, making and causing to be made false statements "in connection with [a bank's] application for an [approximately US$11 million] investment from the Capital Purchase Program of [TARP]." 1 The federal false statements statute covers statements made in connection with TARP applications, as the statute broadly proscribes false statements made "in any matter within the jurisdiction of the executive, legislative, or judicial branch of the Government of the United States." 2 Such jurisdiction can include state agencies receiving federal support, and false statements to officials of those state agencies receiving federal assistance are federal crimes even if the person making the false statement was unaware of the federal assistance.3 The criminal complaint also charges Antonucci with federal mail fraud in connection with the submission of the application via the US Postal Service.4
According to a Department of Justice press release, Antonucci's case represents the first instance of a criminal charge for attempting to defraud TARP.5 Notably, the bank allegedly voluntarily withdrew the TARP application on which the government based the charges in February 2009, after the Federal Deposit Insurance Corporation ("FDIC") advised the bank that its application would not be recommended for approval.6
Agents of the Special Inspector General for the Troubled Asset Relief Program ("SIGTARP") participated in the investigation, combining the SIGTARP's substantial regulatory resources with those of several other federal and state agencies.7 In discussing Antonucci's case, SIGTARP Neil M. Barofsky stated:
This case should stand as a stark warning to would-be wrongdoers that if you attempt to profit criminally from this historic program, SIGTARP and its law enforcement partners will work tirelessly to ensure that you will be caught, you will be charged, and you will be brought to justice.8
Antonucci's case is just the latest example of the federal government's aggressive use of its broad regulatory authority to investigate and prosecute financial crimes. Antonucci's prosecution results from the increased coordination of enforcement resources possible through the federal Financial Fraud Enforcement Task Force ("Task Force"), which President Obama established in November 2009. The efforts of the Task Force and the investigative resources of SIGTARP are examples of the federal government's commitment to "wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes."9 As The Wall Street Journal recently noted, "regulators are ratcheting up their efforts to hold bank executives responsible as more financial institutions succumb to bad real-estate loans and other problems."10
In this regulatory environment, recipients of—and even applicants for—TARP and other federal funds continue to be well advised to consider the broad regulatory and investigative authority associated with federal funds and to carefully consider any statements made to federal agents related to TARP funds. In addition to the false statements and mail fraud criminal risks apparent in Antonucci's prosecution, the risk to TARP recipients from False Claims Act whistleblower allegations, see White & Case's prior advisory, remains. Additionally—as yet another example of the risks of requesting federal assistance—on March 15, 2010, the Recovery Accountability and Transparency Board ("RATB") issued its Quarterly Report to the President and Congress: Insight and Information on the Recovery Board's Operations through February 2010.11 In the report, the RATB disclosed that it and the relevant Inspectors General have received 1,771 complaints related to the US$787 billion in spending under the American Recovery and Reinvestment Act of 2009. Those complaints, through February, resulted in 49 referrals to the Department of Justice, of which the DOJ accepted 43 for criminal prosecution. As previously noted in our prior client alert taking into account the aggressive regulatory stance of federal agencies continues to be wise practice when applying for or utilizing federal funds.
White & Case's White Collar Practice Group will continue to provide updates regarding the white collar and financial industry enforcement environment and stands ready to apply the experienced judgment of its lawyers to the challenges of these times as faced by our clients.
1 United States v. Antonucci, No. 1:10-mj-00507 (S.D.N.Y. Mar. 15, 2010) (arrest of Antonucci); Criminal Complaint at 2, United States v. Antonucci, No. 1:10-mj-00507 (S.D.N.Y. Mar. 13, 2010) (count two).
2 18 U.S.C. § 1001. Violating this statute constitutes a felony, and the statute provides for a punishment of up to five years imprisonment, a $250,000 fine and restitution.
3 See United States v. Shafer, 199 F.3d 826, 828-29 (6th Cir. 1999) (statement to state agency violated § 1001, even if the defendant was unaware of federal support for the state agency to which the defendant made the statement) (citing, inter alia, United States v. Rodgers, 466 US 475, 479 (1984) ("[a] department or agency has jurisdiction, in this sense, when it has the power to exercise authority in a particular situation....[T]he phrase 'within the jurisdiction' merely differentiates the official, authorized functions of an agency or department from matters peripheral to the business of that body."); Bryson v. United States, 396 US 64, 70-71 (1969) ("the term 'jurisdiction' should not be given a narrow or technical meaning for the purposes of § 1001."))
4 Criminal Complaint at 2, United States v. Antonucci, No. 1:10-mj-00507 (S.D.N.Y. Mar. 13, 2010) (count three). Violating the mail fraud statute constitutes a felony, and the statute provides for a punishment of up to 20 years imprisonment, a $250,000 fine and restitution.
5 Press Release, Department of Justice, Manhattan US Attorney Charges Former President of the...Bank with Self-Dealing, Bank Bribery, Embezzlement of Bank Funds, and Fraud (March 15, 2010) available at http://newyork.fbi.gov/dojpressrel/pressrel10/nyfo031510.htm.
6 Criminal Complaint at 29, United States v. Antonucci, No. 1:10-mj-00507 (S.D.N.Y. Mar. 13, 2010).
7 Id. at 6.
8 Press Release, Department of Justice, Manhattan US Attorney Charges Former President of...Bank with Self-Dealing, Bank Bribery, Embezzlement of Bank Funds, and Fraud (March 15, 2010) available at http://newyork.fbi.gov/dojpressrel/pressrel10/nyfo031510.htm.
9 Id.
10 Lingling Wei & Chad Bray, Bank Chief Accused of TARP Fraud, The Wall Street Journal., March 16, 2010, available at http://online.wsj.com/article/SB20001424052748703909804575123672347495854.html.
11 Available at http://www.recovery.gov/About/board/Documents/RATB_QuarterlyReport-Mar2010.pdf.
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